Monday
Apr282008

Oil's Bull Now Double The Average in Gains and Length

Energystocks1_3Since 1986, the average bull market (20% rally preceded by a 20% decline) in oil has lasted 242 calendar days and averaged a gain of 67.85%.  The current bull market in oil started on January 18, 2007, and to its peak on April 22nd, the commodity rallied 136.47%.  That makes the current rally more than double the average in gains and nearly double the average in length.

Below we highlight stocks in the S&P 500 Energy sector that are up the most during oil's bull market (as of 4/24).  As shown, CNX is up the most at 157%, followed by NOV at 155%.  RRC, HES and EOG round out the top five.  These stocks have had huge rallies, and when energy prices do pull back at some point in the future, these top performers will most likely struggle.

Energystocks

 

Monday
Apr282008

Sector Relative Strength

Below we have updated our charts of sector relative strength.  In each chart, rising lines indicate periods where the sector is outperforming the S&P 500.  Charts with red shading indicate that the sector has underperformed over the last year.  Additionally, in each chart we have also included red dots that highlight each of the Fed rate cuts since August.

Over the last year, four sectors have underperformed the S&P 500 (Consumer Discretionary, Financials, Health Care, Telecom Services), while six have outperformed.  Although Financials have outperformed in recent days, the sector remains in a downtrend and is currently approaching the upper end of the downtrend.  How the sector acts from here should be a good tell as to where we are in the credit crisis.  If the sector stalls, it may indicate that things still need to be worked out.  If the sector can break its downtrend, it would be a sign that the worst is over.

After sharply outperforming, both Materials and Energy have hit minor snags as they traded to the upper end of their ranges.  How the dollar performs from here may be the biggest variable in the outlooks for these two sectors.  Meanwhile, the Technology sector has broken its downtrend line that was in place since late last year. While the sector is short-term overbought, investors may want to use any pullback as a chance to increase exposure.

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Monday
Apr282008

This Week's Fed Rate Decision

Investors will once again focus on the Fed this Wednesday when policymakers announce their decision on the Federal Funds Rate.  After peaking at 5.25% in June of 2006, the Fed has lowered rates 300 bps since last September.  This week's rate decision is a little more up in the air since inflation concerns seem to have taken over the weakening economy as the problem du jour. 

We want to know what Bespoke readers want the Fed to do and what they think the Fed will do.  Please answer the two poll questions below, and we'll report back with the results prior to the Wednesday announcement.


What do you want the Fed to do?
Leave the Fed Funds Rate at 2.25%.
Lower the Fed Funds Rate to 2.00%.
Lower the Fed Funds Rate to 1.75%.
Raise the Fed Funds Rate to 2.50%.
  
Free polls from Pollhost.com


What do you think the Fed will do?
Leave the Fed Funds Rate at 2.25%.
Lower the Fed Funds Rate to 2.00%.
Lower the Fed Funds Rate to 1.75%.
Raise the Fed Funds Rate to 2.50%.
  
Free polls from Pollhost.com

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Friday
Apr252008

This Week's B.I.G. Tips Reports

Below we provide the titles of the in-depth B.I.G. Tips reports we released this week.  If any spark your interest, they are all available to our Premium subscribers.  These are anticipatory, ahead-of-the-curve research reports that cover markets, economies, stocks, commodities, housing and anything else related to making people money. 

This week's B.I.G. Tips reports: Weekend Relief (a technical look at the S&P 500), Earnings Season Update (beat and miss rates and price performance), Playing an Oil Decline (what sectors and stocks to buy if oil has a pullback), Worst New Home Sales Reports (a look at market performance on poor housing numbers), Debt Markets vs Growth and Stock Performance (a unique country analysis), AAPL, AMZN and MSFT Earnings (typical trading patterns on each stock's report days), Oil Overbought (expecting a short-term pullback), Earnings Yield vs Bond Yields (how attractive are stocks vs bonds), Country Technicals (a look at the price charts of 22 equity markets), Country PEG Ratios (a look at stock valuations and GDP growth).

Click here to subscribe to Bespoke Premium today.

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Friday
Apr252008

Historical Michigan Confidence Chart

Today's Michigan Confidence reading of 62.6 would make April's level the lowest since March 1982 (the number still has to be revised).  For those interested, below we highlight a historical chart of Michigan Confidence since 1978.  As shown, sentiment in the US has taken quite a hit in recent months.

Michconf

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Friday
Apr252008

Bespoke's Sector Snapshot

Below we highlight our trading range charts of the S&P 500 and its ten sectors.  The red area represents between one and two standard deviations above the sector's 50-day moving average.  When the price moves into or above the red zone, it is considered overbought.  After suffering through a nasty downtrend where the price rarely made it out of oversold territory, the S&P 500 and most sectors are now overbought.  Technology, Energy, Materials and Utilities are the most overbought, while Financials, Consumer Discretionary, Consumer Staples and Health Care are the least overbought.  Energy and Materials have pulled back in recent days, but still have a ways to go before they get back into the neutral zone.

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Condcons

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Utiltels

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Friday
Apr252008

Talk About Having Too Much Money

In this morning's Investor's Business Daily, the following blurb caught our attention.  The link to the story from the NPR highlights even more of the mind defying projects going on in Dubai:

Dutch architects are building a string of floating islands off Dubai with hotels, restaurants and a heliport.  The islands will be made of foam and concrete platforms, with flexible pipes bringing in water and electricity and carrying away wastewater, NPR reported.  Each island is in the shape of an Arabic letter, and the chain would spell a piece of Arabic poetry written by the United Arab Emirates prime minister, the ruler of Dubai.

Is the glut of money in the Middle-East so great that they have billions lying around to build a bunch of islands spelling out a poem?  One can only imagine what type of projects will get undertaken if oil were to ever hit $200.

Friday
Apr252008

YRCW Up 30% On Earnings

Yesterday we posted that YRCW may actually be due for an upside earnings surprise since two of their biggest customers -- WMT and HD -- had performed well lately.  While losses for the company were actually worse than expected, investors seem to like the report since shares are up a whopping 30% today.

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Friday
Apr252008

Analyst Bear Raid on Ford (F)

Normally, after a stock has its biggest one-day gain in more than five years after reporting stronger than expected earnings, you can expect a parade of upgrades as analysts jump on the bandwagon.  This morning, however, we are seeing the complete opposite in shares of Ford (F).  After rising 11.7% yesterday following the release of a stronger than expected first quarter earnings report, not one, not two, but three different analysts downgraded the stock.  After seeing the stock fall from $9 down to $5 and then rise up to $8 again, analysts at JP Morgan, Merrill Lynch, and Bear Stears don't want to risk taking that ride again.

Ford_042408

Friday
Apr252008

Earnings Beat Rates By International Exposure

As earnings season approaches its mid-point, we looked to see how companies are reporting based on their international revenue exposure.  Using the Russell 1000 as our universe, we grouped companies based on the percentage of revenues each one derives from international sources.  We then calculated the percentage of companies in each group that have reported better than expected earnings.  As shown, it pays to do business outside of the US. 

So far this quarter, of the 450 companies in the Russell 1000 that have reported earnings since March 1st, 57.3% percent of them have beat EPS expectations.  However, of the 95 companies that derive more than half of their revenues outside of the US, the beat rate rises to 68.4%.  This contrasts to the 54.4% beat rate of companies that get less than half of their sales outside of the US.  Even worse is the subgroup of 163 companies that have no international exposure.  The beat rate for these companies is only 46%.

For investors interested in revenue exposure by individual company, our International Revenues Database provides the percentage split between international and domestic revenues for each company in the Russell 1000.  The database is currently available free of charge to all yearly subscribers to Bespoke Premium.

Russell_1000_companies_beating_ea_2

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Thursday
Apr242008

Fox Business News Appearance Friday April 25th

Snap1_2Paul Hickey will be on Fox Business Channel at 9:45 AM ET on April 25th to discuss the markets and oil.

Thursday
Apr242008

Oil Bulls Biggest Nightmare...A Stronger Dollar

While it is way too early to say that today's rally in the dollar is the start of any real change in trend, it did give some insight to what investors can expect in commodities and oil if the dollar were to actually start going up.  In the chart below we charted oil with the US Dollar index (inverted) over the last three years.  While the magnitude of the moves in each asset have differed, the tit for tat relationship between the two has been constant. 

While daily 'reasons' for oil's move are usually attributed to tensions abroad, refinery utilization rates, inventory reports, etc, investors may be better served looking at the direction of the dollar and paying more attention to what the Fed intends to do with interest rates.

Oil_vs_dollar

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Thursday
Apr242008

Current and Historical Sector Weightings of the S&P 500

As we've done in the past, below we have updated the current and historical weightings of the S&P 500's sectors.  As recently as two days ago, Energy had the second biggest weighting in the index.  It currently ranks third, but that's much higher than its 7th place ranking as recently as the end of 2005.  Financials still rank first at 17.1%, followed by Technology at 16.3%.  These weightings change dramatically due to sector rotation over the years.  Back in 1992, Consumer Discretionary had the biggest weighting in the index, but it's now ranked 7th at just 8.5%.  Technology got all the way up to 29.2% back in 2000 during the Internet bubble, but its weighting was cut in half by 2002.

As shown in the individual charts of sector weightings, Energy has really taken share from other sectors in recent years.  Just like the spike in Financials that was seen in 2006, these big rises should flash warning signals for investors.

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Thursday
Apr242008

YRCW: The Anti-Transport

This morning's "Ahead of the Tape" column in the Wall Street Journal questioned the rally in the Transports, and whether or not it is really an indication of a stronger economy down the road.  One stock mentioned in the article is YRC Worldwide (YRCW).  Last year we wrote about YRCW and highlighted how for several quarters now the stock has been a serial underperformer.  Additionally, since WMT and HD are two of the companies biggest customers, we noted that YRCW's underperformance was more likely due to troubles at those two companies than what was happening in the economy. 

YRCW reports earnings after the close today, and analysts aren't expecting much (out of the 12 analysts covering it, 7 have it rated a hold and 5 have it as a sell).  But just as the stock suffered as a result of its exposure to WMT and HD, the recent performance of these two names suggests that things may not be as bad for YRCW as the analysts think. 

Yrcw_hd_wmt_last_two_years_2

Finally, in our post last Fall we noted that, "...there isn't a day that goes by lately where the CEO of YRC Worldwide (YRCW) isn't interviewed on TV talking about how bad the economy is right now."  Maybe it's just us, but we can't remember the last time Zollars was on TV complaining about the economy.  Hopefully it means things have picked up.

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Thursday
Apr242008

Energy ETFs Down But Still Overbought

On Tuesday evening, we posted that energy stock ETFs had reached extreme overbought territory.  Today the ETFs are showing their first signs of a pullback, with all of them down 2% or more.  As shown in the charts below, however, the ETFs remain in overbought territory and still have more room to go on the downside before they even test their first real levels of support.

Energyetfs

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